The Federal Reserve announced a 0.25% interest rate cut last week. However, on the first trading day after the cut, the Hang Seng Index initially rose before falling back. It wasn't until the second trading day, when U.S. stocks hit new highs, that the Hang Seng Index significantly rebounded, briefly rising above 26,000 points. However, it ultimately closed below 26,000 points, which is relatively weak compared to U.S. stocks. It seems that a considerable amount of Hong Kong capital has recently been flowing into U.S. stocks. The technology stocks that were hot a while ago have been adjusting downwards from their highs, and there is still no significant recovery trend. Many small investors who chased technology stocks at high prices are now left holding the bag.
<h2>Bank and Insurance Stocks Benefit from Rate Cuts</h2>
In any case, there are still stocks to trade after the rate cut. HSBC (005) and Standard Chartered (2888) both reached new highs, and their upward momentum is strong. Both HSBC and Standard Chartered are note-issuing banks in Hong Kong, and another note-issuing bank, Bank of China (Hong Kong) (2388), has also performed well. The rate cut is beneficial for bank stocks because it encourages more businesses to borrow money from banks, thereby driving economic growth. The rate cut also reduces bad debts for banks, increasing profits.
The insurance industry, by nature, is also a financial institution. The rate cut not only benefits the banking sector but also the insurance sector. Insurance companies collect premiums, most of which are invested in stocks and bonds. The rate cut increases the investment profits of insurance companies and encourages more people to buy insurance to enhance their returns, leading to an increase in insurance policies. The stock prices of China Life (2628) and AIA (1299) have risen following the rate cut.
Technology Stocks Will Be Revived
Last week, the Central Committee of the Communist Party of China held its annual Central Economic Work Conference to formulate economic policies for 2026. This year's work conference outlined eight major tasks, with no significant new policies, essentially strengthening the current work being done. Since there will be strengthening, investors who bought technology stocks at high prices recently need not worry too much. It is believed that they won't have to wait long; technology stocks will surely be revived, as developing technology is currently a top strategic priority.
<h2>Heavy Trucks and Tractors Are Not Experiencing &#34;Involution&#34;</h2>
One of next year's work goals is to &#34;counter involution.&#34; Currently, the automotive industry is the most severely affected by &#34;involution.&#34; However, the automotive industry facing &#34;involution&#34; mainly refers to small cars. There are not many heavy truck manufacturers, so &#34;involution&#34; is not severe. China National Heavy Duty Truck Group (3808) is a prime example worth considering. Additionally, tractors in rural areas also do not experience &#34;involution,&#34; and the stock performance of YTO Group (038) has been quite good.
CATL Receives Support from International Investors
Moreover, although the &#34;involution&#34; problem for small cars is serious, the business of CATL (3750), which produces electric vehicle batteries, is thriving. CATL almost monopolizes the business and has a global monopoly. The H shares of this stock were listed not long ago, and I bought them on the first day of listing. The reason for my purchase was that I noticed the H share price of CATL was significantly higher than that of the A shares, which is a rare occurrence. When something that rarely happens occurs, it must be an opportunity.
Why are H share prices higher than A share prices? The reason is that foreign investors are scrambling to buy. Foreign investors are optimistic about CATL, but the A share market has too many restrictions, so they decide to buy H shares. These foreign investors include wealthy international fund managers
Zeng Yuancang

HSBC

00005

02888

After the Federal Reserve cut interest rates by 0.25 basis points, the Hong Kong stock market performed relatively weakly, with funds flowing to the US stock market. Bank and insurance stocks benefited from the rate cut, with HSBC and Standard Chartered reaching new highs. Although technology stocks have adjusted, they are expected to rebound in the future due to the economic policies of the Central Committee of the Communist Party of China. The automotive industry is facing "involution," while the heavy truck and tractor industries remain unaffected

- The U.S. Federal Reserve recently cut interest rates by 0.25%, leading to mixed reactions in the Hong Kong stock market, with the Hang Seng Index initially rising but ultimately closing below 26,000 points.  
- The interest rate cut benefits bank and insurance stocks, with HSBC and Standard Chartered reaching new highs, as it encourages borrowing and reduces bad debts, thus boosting profits.  
- Despite challenges in the tech sector, optimism remains for a rebound, especially following China's economic policy meeting, which emphasizes strengthening existing initiatives rather than introducing new policies.

Interest rate cuts create stocks to trade | Tsang Yuen Cheung